This site uses cookies to store information on your computer. Some are essential to make our site work; others help us improve the user experience. By using the site, you consent to the placement of these cookies. Read our privacy policy to learn more.

Latest Stories

TIGTA criticizes the IRS on conference overspending

In the latest in a series of bad news days for the IRS, the Treasury
Inspector General for Tax Administration (TIGTA) issued a report
Tuesday on the IRS’s wasteful spending on conferences (TIGTA,
Review of the August 2010 Small Business/Self-Employed
Division’s Conference in Anaheim, California, Rep’t
No. 2013-10-037). TIGTA focused its audit and report on the IRS
Small Business/Self-Employed (SB/SE) Division’s conference in Anaheim
in 2010 out of the many conferences held in the past three years
because it received a specific complaint alleging overspending at that
conference and it was the most expensive IRS conference during that
period. Overall, TIGTA found that the IRS spent $49 million on 225
conferences from 2010 through 2012.

In response to the TIGTA report, the House Committee on Oversight
and Reform has announced that it will hold a hearing on the issue this
Thursday. Acting IRS Commissioner Danny Werfel issued
a statement in which he called the wasteful spending “an
unfortunate vestige from a prior era” and said, “Taxpayers should take
comfort that a conference like this would not take place today.”

The conference in Anaheim involved 2,609 SB/SE managers and
executives at Sheraton, Marriott, and Hilton hotels and reportedly
cost $4.1 million (the IRS was unable to establish exactly how much it
cost). Despite the availability within the IRS of event planners, the
SB/SE division used two outside event planners who received
commissions from the hotels of $133,000, which were based on the
number of rooms the IRS used.

TIGTA also found that the IRS could have negotiated lower rates had
it not accepted other benefits from the hotels including suite
upgrades, two of which were presidential suites that cost between
$1,500 and $3,500 per night that were provided to SB/SE division
executives for $135 per night. Other benefits included free cocktails
and promotional gifts, such as logoed brief bags, engraved pens,
picture frames, and clocks.

In its report, TIGTA made nine recommendations, all of which the IRS
agreed with. A few of the details of the conference did not result in
any specific recommendations, perhaps because they spoke for
themselves. First, TIGTA mentioned that the conference paid $135,350
for 15 outside speakers, including two keynote speakers. One of the
keynote speakers was paid $17,000 to paint portraits of various famous
people and the Statue of Liberty and give them to audience members.
Three of the paintings were later sold at auction for small amounts.
The second speaker was paid $27,500 for two one-hour motivational
speeches on radical innovation.

TIGTA recommendations

Recommendation 1 requires the IRS chief financial officer (CFO) to
verify that the appropriate information was being tracked to ensure
that the actual costs of conferences and the number of attendees could
be established and audited. Although the IRS had a code employees were
required to use when reporting expenses, TIGTA identified 188
employees who attended the Anaheim conference but did not use the
correct code.

When the Anaheim conference was held, there was no plan to track
whether employees attended any of the training sessions, some of which
may have qualified as continuing professional education (CPE) for IRS
CPAs who attended the conference. The second recommendation was to
implement a policy to determine whether specific training sessions
held at conferences qualify for CPE credits for CPA employees.

The third recommendation addressed the process used to select the
conference site. The IRS has a centralized delivery services (CDS)
system in place to help choose conference space for IRS events,
including off-site training when necessary. Instead of using the CDS,
the SB/SE division used outside event planners (as noted above) and
also paid a few SB/SE employees $6,000 extra to plan the conference.
The event planners were not under contract with the IRS and therefore
had no incentive to negotiate lower room rates with the hotels.
Nongovernment facilities should be avoided except where it can be
demonstrated that the anticipated benefits will more than offset any
additional direct expenditures and will not appear to the general
public as unnecessary spending.

When off-site facilities are used, CDS must document that government
property was considered but was determined not available and explain
why any available government space did not meet the conference’s
business needs. TIGTA recommended that the IRS reemphasize the
existing procedures to ensure that business units contact CDS when
planning any future conference. Further, it recommended that new
procedures require all documentation that supports how nongovernment
facilities for future conferences were selected be maintained and
available for management review. Recommendation 4 is related to No. 3:
Implement procedures to identify the appropriate use of
nongovernmental event planners when planning conferences, including
how they should be selected and compensated.

The fifth recommendation involved three planning trips taken by
SB/SE employees to plan and run the conference in Anaheim. The CFO
should establish procedures to determine when these types of trips
should be made and require local IRS employees, to the extent they are
available, to perform these duties.

The sixth recommendation was prompted by two videos that were
created for the conference. A “Star Trek” parody video was created
because the conference theme was “leading into the future”; it
featured IRS executives in a tax-themed “Star Trek” skit. The second
video involved managers and executives dancing on a stage. The costs
to produce these videos could not be determined precisely because
adequate records were not kept, but the IRS claimed it spent over
$50,000 on them. As a result, TIGTA recommended procedures be
established to outline the need for videos produced for future
conferences. The videos’ purpose should be clearly detailed in any
conference request, and their costs should be included in the request.

Seventh on the list was a requirement for the CFO to determine
whether hotel room upgrades should be allowed and for the applicable
business unit executive to approve any that occur. The eighth
recommendation concerned the Anaheim conference organizers permitting
local IRS employees to stay at the conference overnight and reimburse
them for the costs. Because reimbursing these expenses may be taxable
to the employee, the IRS should have, but did not always, issue Forms
W-2 taxing the employees.

The final recommendation was concerned with unnecessary costs, such
as for setting up an exhibitors’ hall at the conference and paying for
promotional items such as totes with imprinted logos. There was also a
large expense for technology that was used minimally at the
conference. TIGTA recommended that the CFO establish procedures to
determine the need for any exhibitor halls and technology for future
conferences. The purpose and use of any exhibitor hall or technology
should be clearly detailed in any request for a conference and include
the costs, including for giveaway items, in the approval request.

IRS response

The IRS on Tuesday posted a “key
facts” document in response to the TIGTA report. In that document,
it said that the IRS “has dramatically cut the number of meetings
involving travel since 2010. We did not hold any similar, large-scale
nationwide meetings like these in 2011, 2012 or 2013, and we do not
have any plans to do so going forward.” The IRS also acknowledged
that, “While there were legitimate reasons for holding the meeting,
many of the expenses associated with it were inappropriate and should
not have been incurred.”

The IRS also noted that it has decreased travel and training
expenses by 80% since 2010, and posted a
chart showing its conference spending over that past three years.

What do accounting firms waiting on others to develop AI, automation, and data analytics tools have in common with a baseball fan sitting in a stadium filling with water at an exponential rate? The answer could determine your firm’s fate.